Have a question, as a friend of mine pays his employees cash and claims it saves him money. Pay the guys cash benefits. No paper work to take care of. No payroll matching and workman's comp. Guys will work for less. Paying by check benefits. You get to deduct their wages. Ok, in the end when all considerations are figured in, what really is the cost savings one way or the other. I have read that an employee costs 25% above their direct pay in related expenses including payroll taxes, workman's comp and costs to do all the paper work, etc. If you pay cash you eliminate all those expenses, plus the guys will work a bit cheaper. If your in the 30% tax bracket, then writing off employees is only saving you 30% correct? Or what am I missing.